by Michael K. Townsley | Aug 29, 2026 | Private Colleges & Universities in Crisis
A recent report by CUPA shows that adjuncts make up 46% of all faculty in private colleges. While the report dealt mainly with compensation policies, a major underlying question is – could private colleges and universities survive without the cost savings of using adjunct rather than full-time faculty? Given the current and future state of finances in higher education, a case could be made that private institutors are surviving on the cost savings generated by using adjunct faculty. The implication, if this is a fair assumption, is that in order to survive the grinding financial distress of the next decade the percentage of adjuncts will grow and the correspondingly the percentage of full-time faculty will shrink.
Of course, the wild card is AI which has the potential of wiping out a huge swath of adjunct and full-time faculty
by Michael K. Townsley | Aug 29, 2026 | Private Colleges & Universities in Crisis
Standard and Poor’s joins Fitch’s and Moody’s as the latest credit agency warning that finances in higher education, in particular private colleges and universities, are continuing to deteriorate. According to Standard and Poor’s the outlook is definitely negative for the coming year and maybe longer. The reasons for this by now are well known – the demographic cliff, changes in prospective student preference for college, price competition, the impact of new technology, and colleges trapped with a fixed cost budget model that lacks flexibility. Given the long-term demographic trends, the number of colleges facing deep financial distress will surely increase.
An interesting side note about shrinking margins is that studies have suggested that many sectors of the higher education market operate in an oligopolistic market. This may no longer be true for a larger swath of higher education because shrinking student markets and aggressive price competition indicate that higher education is losing market power and no longer can control pricing. The loss of market power is evident for private colleges with enrollments less than 2,000 students. The disconnect between tuition discounts and enrollment means that higher tuition discounts are going to offset the loss of revenue through higher discounts.
The business model for smaller, tuition-driven college is broken. They either must find new revenue streams or make huge cuts in their expenses. Even then, there are other factors, such as location of the college, accreditation restrictions, tenure structure, and other policies constrain major changes in a college. Broken business models will push many more colleges over the brink to oblivion.
by Michael K. Townsley | Aug 29, 2026 | Private Colleges & Universities in Crisis
Recently the news was published that St. Michael’s College in Vermont has been authorized by the court to make withdrawals up to $30 million from its restricted endowment fund. This request followed a public notice from NEASC that the college was running dangerously low on cash.
According to President Richard Plumb, they had no other option but to request the court to authorize the withdrawal. Plumb stressed that without the extra cash the college faced a credible risk of being forced to cease operations.
Enrollment seems to be the culprit in the need for cash because it has fallen by nearly 45% over the past ten years. Given that tuition is a prime source of funds for tuition-dependent colleges, the enrollment collapses of this scale create a major financial risk for the college. As enrollment fell, the college began to report serial deficits, which are a warning sign of rising risk. Even though a large proportion of the college’s enrollment comes from outside the state, the nearest states have also been vulnerable to shrinking student pools. It should not be surprising that a college in Vermont is facing serious enrollment challenges because the New England region is the weakest when it comes to the size of the potential student market.
As a result, Moody’s credit rating service has downgraded it credit making it more expensive for the college to borrow from public lenders. This may explain why St. Michael’s chose to take money from the endowment fund rather that going after a loan from public lenders.
You would think that an elite college like St. Michael’s, a second-tier elite institution, would be a safe haven. However, as daily reports of colleges in trouble are showing there may be any safe havens except for the super wealthy institutions.
by Michael K. Townsley | Aug 29, 2026 | Private Colleges & Universities in Crisis
This blog will list several major threats to survival. Regrettably, I do not have any sure-fire solutions to these problems. May be my readers will have suggestions.
Problem #1:
State education agency dawdles on sending funds, even though the colleges is in compliance with the conditions of the funds. What do you do? Pull out all the political stops for a joint meeting with the governor and head of the state education department.
Problem #2:
You fail to meet a debt covenant condition because you have a deficit or you fail to meet the cash to debt service, and the bank immediately threatens to call the loan. Of course, the college does not have the funds to cover the call. What do you do? Does the college have any asset that can be sold immediately and cover the loan? If not immediately meet with the president of the bank to ask if the call can be negotiated. Do not waste time with a loan officer; they may earn incentive pay when a loan is called.
Problem #3:
Your cash forecasts shows that the college will not be able to cover its payroll or bills over the summer? What do you do? Let’s assume that you have at least a semester to solve the problem. First, cancel any summer programs that do not generate positive net revenue. Second, cancel all faculty or staff travel for whatever reason. Sell any unused or underused assets. Cancel or postpone all construction and maintenance projects. Ask board members if they know of any sources for a quick cash loan. Ask wealthy donors for a cash gift to carry the college over the summer.
Problem #4:
The severe cash problem described in ‘Problem #3 will probably continue through the start of the next academic year and grow even worse next summer. What do you do? The problem may be the one that forces the college to look for a mergers or takeover. The Chronicle of Higher Education says that a college in this state of deep financial distress may not be choosers. These colleges need to find anyone who will take them over including major liabilities. The best outcome is somehow the name of the college will be retained by the takeover college. Possibly, the later college will keep the name if the distressed colleges have any unique academic programs or they may keep the name in some other way. Regardless, under these conditions, the college must take immediate action.
Problem #5:
One or more donors are threatening to sue to have their gifts returned because of dissatisfaction with news about financial problems. What do you do? The best that you can do is meet with each donor and then with the donors as a group to explain plans to end the financial distress.
Problem #6:
Student attrition is increasing at dramatic rates because students are leaving after hearing rumors that the college will close and because they see deteriorating services. What do you do? You have to meet with student leaders, students by academic programs, and possibly have an open forum, although that can be risky in today’s political environment.
Problem #7:
Colleges often have made decisions in the deep past that come back latter to haunt a college. These decisions may include promises to: some graduates twenty years ago to cover the tuition of their children; athletes on a championship team deep in the past that when a new gym is built that it will be named after them, but when a new gym in built thirty years later, no one recalls the promise except for the few members of the team who are still living; major errors in accounting from the deep past that were not corrected at the time and new auditors insist that they be corrected in the current audit leading to a sizeable deduction in net assets; or donors that their gifts would be used for certain purposes, but no one made a record of the promise and the current administration needs to use the gift for immediate needs. What do you do? Since many colleges were not diligent in record keeping a presidents must insist on deep research to determine if some action in the past will have an adverse effect on the present. Unfortunately, since as noted, the promises were verbal and not recorded or financial records are inaccurate, there is only one rule – Honesty is the best policy. Under these circumstances, the persuasive powers of the president will be sorely tested.
by Michael K. Townsley | Aug 29, 2026 | Private Colleges & Universities in Crisis
The Public Agenda recently reported that many young men are more doubtful than young women of the value of higher education. The belief of these men who took the survey seems to rest on the contention that college is better suited for the needs of women. The survey cited in Public Agenda titled “Listening to Young Men” was conducted in November and interviewed 3,559 American adults aged 18 or older.
In addition, a large proportion of men and women taking the survey believe that the value of a college credential is less than it was a decade ago. Moreover, half of the men and 57% of the women said that college degree will be worth less in a decade. Furthermore, more that 50% of men and women see a college degree as a “questionable benefit”.
Given the imperfections of surveys, the findings fit the general impression of reports in the general media about young men and women in college. This data does not bode well for higher education. This finding implies that the prospective student market may believe that the investment is no longer possible, because the cost of a degree is so high and the income from a degree is so low that they cannot earn enough to justify the degree.
Higher education faces a real dilemma if the preceding suppositions have any validity. First, colleges are having a difficult time reducing the operational costs of producing a degree, and second, lowering the price of tuition through larger tuition discounts is not generating sufficient cash to support operation.
This survey is a quandary for presidents, chief financial officers, and especially chief marketing officers. How do you sell your college to your student market, when more than half of them do not believe that a degree is worth the cost.
Citation: The information for this report came from Steven Strategy’s Weekly Stats and Strategies on July 21, 2026. The report was reported by Sara Weismann (July, 2026) “Young Men’s Perceptions of Higher Ed”; Inside Higher Ed; Young Men’s Perceptions of Higher Ed.